MANAGEMENT DISCU.S.SION SECTION

Good day everyone, and welcome to the TD Ameritrade Holding Corporation's September Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is President and Chief Executive Officer, Fred Tomczyk and Chief Financial Officer, Steve Boyle. At this time, I would like to turn the call over to Bill Murray, Managing Director of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone and welcome to our September quarter and full year earnings call. Please refer to our press release and September quarter earnings presentation, which can be found on amtd.com. The earnings presentation, includes our Safe Harbor statement and reconciliation of certain Non-GAAP financial measures to our most comparable GAAP financial measures. Description of risk factors are included in our most recent financial reports Forms 10-Q and 10-K. As usual this call is intended for investors and analysts and may not be reproduced in the media, in whole or in part, without prior consent of TD Ameritrade. As is our normal custom please limit your questions to two so we can cover as many analysts as possible. With that, let me turn the call over to Fred. Fredric J. Tomczyk: Thank you, Bill. Good morning and welcome, everyone. Well, we've come to the end of our 2015 fiscal year. Strong trading and asset gathering continued to help us offset a difficult interest rate environment, which has allowed us to deliver growth and earnings, and provides us with good momentum as we start 2016. Let's start with a look at the fourth quarter highlights on slide three. Average client trades per day were 479,000 in the September quarter, an activity rate of 7.3%. Net new client assets were $16.2 billion, a 9% annualized growth rate and up 21% year-over-year. Client assets ended the quarter at $667 billion, up 2% from last year. And we earned record net revenues of $831 million, up 5% year-over-year. This resulted in our delivering $0.40 of diluted earnings per share for the quarter, which is up 5%. We also reengaged our share buyback this quarter, repurchasing more than 7 million shares. Now let's turn to slide four for a look at the full fiscal year. 2015 was a record year with continued momentum and strength in nearly every area of our business. Average client trades per day were a record 462,000, an activity rate of 7.1% and up 8% year-over-year. Net new client assets were a record $63 billion, a 10% annualized growth rate, our second – our seventh consecutive year of double-digit net new client asset growth. Fee-based investment balances ended the year at $152 billion, up 6% year-over-year. Interest-sensitive assets were a record $108 billion, up 8% year-over-year. And we earned record net revenues of $3.2 billion, up 4% from last year. This resulted in our delivering a record $1.49 in diluted earnings per share for the year, which is up 5%. And finally, we returned approximately 80% of our net income, excluding the amortization of intangibles through a combination of dividends and share repurchases. This includes $0.60 per share in cash dividends and 10.9 million shares repurchased. Now let's turn to the key elements of our growth strategy starting with asset gathering on slide five. We ended fiscal 2015 with a record $63 billion gathered in net new client assets or more than $250 million each business day on average. As I said earlier, this represents a 10% organic growth rate and net new client assets were up 18% year-over-year. Both institutional and retail had very good years. In the retail channel it was particularly strong this year with net new client assets, up 22% from fiscal 2014. Asset gathering opportunities from existing clients remained quite strong. Record branch referrals drove an increase of 19% in asset gathering productivity from our branch based investment consultants. We also changed our marketing strategy, utilizing data and analytics to make smarter more opportunistic decisions. Those changes, combined with sales force efforts drove a lift in both the number and quality of new funded accounts despite a flat marketing spend. And our asset retention remains quite good. All-in-all we have a solid foundation that we plan to build upon in 2016. We are renewing our asset gathering efforts amongst our high networth clients, enhancing our service model to drive engagement and retention. We are also increasing our marketing spend by $12 million to build upon the momentum we realized in 2015. And we will enhance our guidance and advice offering, arming RICs with new tools to help them have more planning based conversations with clients. Turning to institutional, we remain the fastest growth player in one of the fastest growth segments of financial services. Net new client assets for the channel were up 16%, driven by growth from both breakaway brokers and existing RIAs. Brokers and investors alike continue to move to the independent RIA model and we have captured more than our fair share of the trend toward independence. We continue to compete and win with our technology and top line service offerings. In 2016, we'll give our advisors a unified integrated experience with one login and consolidated account view across multiple apps they use to manage their business. We call it Veo One and it's unlike anything else in the industry. Early reviews on the platform have been very positive. In addition to launching Veo One and further enhancements to iRebal, we will continue enhancing our advisor and client experience, creating operational efficiencies through the automation of processes and enhancing the client experience. These efforts, combined with those from the retail channels will help our strong asset gathering continue. Our target for the next year is $47 billion to $73 billion, or 7% to 11% of beginning client assets. Now let's move onto trading on slide six. 2015 was a record year for trading. We averaged 462,000 trades per day, an activity rate of 7.1%. The first three quarters of the year were relatively quiet from an intraday volatility perspective and yet our volumes remained healthy. That changed in the fourth quarter which saw 37 days where actual intraday volatility was greater than 1%. The VIX spiked to a record 54 on August 24 and trended in the low to mid-20s for the rest of the quarter. Overall, mobile contributed for a record 16% of DARTS for the fiscal year, with mobile trades in the fourth quarter up 50% from a year ago. Daily logins for the year were up 22% over 2014 and we continue to average more than 2,000 new users per day. It was also a record year for derivatives at 43% of our trades per day. Options averaged 32% of trades per day and futures, 10%. Approvals for both products continue to grow with option approvals in 2015 higher than in any other year and futures approvals up 50%. As we look ahead to 2016, we're looking at an activity rate range of 6.6% to 7.2%. Client cash balances have risen and margin balances have come off a bit, but when we look at the balance of the year, we would expect overall engagement to remain relatively strong. There is still much uncertainty with respect to the interest rate environment, commodities, global growth and geopolitical events. News in any of these areas will continue to drive volatility and likely our activity rates throughout the year. So far in October, intraday volatility and the VIX have both come in and our clients have decreased their equity exposure in September per our investment movement index and are now expressing some caution as they await direction from the markets. As a result, October trades to-date are averaging 435,000 trades per day. Our focus for the next year will remain on the fastest growth areas in the space, namely, what's being traded like options and futures and how we are helping people trade through newer technologies like mobile and social media. If you look at the different functionality and platform updates we've made over the last few years, you'll notice that most of them include a social influence. We launched the first in-app chat which allows clients to chat directly with our service reps from our mobile app. We launched Social Signals, another first which integrates real-time data from Twitter into the research offering. And we launched thinkorswim Sharing, allowing clients to share their platform settings with others. The possibilities are vast and you should expect us to continue innovating to further improve the trading experience. Now let's turn to investment product fees on slide seven. Investment product fees, which have doubled over the last five years were a record $334 million to end fiscal 2015. When we compare our results to last year, average balances are up 14% while revenue is up 8%. The appetite for investment guidance and advice has been strong for some time. Our sales teams exceeded targets and generated good momentum that we're building upon as we enter 2016. Our focus for the next 12 months will be on continued enhancements to our guidance and advice offering in an attempt to grow revenues to a range of $365 million to $400 million. Our plans include a complete end-to-end redesign of the Amerivest experience that will make the sales process simpler and the post-sale process much more robust, intuitive and convenient, all leveraging technology. We will share more details about this initiative later in the year. Now let's turn to slide eight. While the story of 2015 is one of continued momentum and strength in nearly every area of our business, when we look outside at the environment we face, whether in the markets, the economy or the geopolitical environment, we see a lot of uncertainties. But inside our organization when we look at our people and what we're doing for our clients and the future growth potential of this company, we remain very confident and very focused on executing our strategy. Our plan for the next 12 months is to continue that momentum. We will remain focused on organic growth, whether it be asset gathering, trading or investment product fees. We'll remain focused on productivity and making disciplined investments resulting in controlled expense growth. And we will remain good stewards of our shareholders' capital, targeting a range of 60% to 80% of net income, excluding the amortization of intangibles, to return to our shareholders. If we execute well, we would expect earnings for fiscal 2015 to be in the range of $1.45 to $1.75. Now as we look ahead, beyond 2016, we believe we remain well-positioned to meet the needs of today's and tomorrow's investors. We see a continued hunger for investment guidance and advice, both in the form of self-service and in the form of a human connection that many of us desire when it comes to managing our financial futures. We have built a business model that supports both and we will continue to refine and enhance our offerings in these areas. Next, mobile technology, social media and data and analytics will continue to change how we communicate and manage nearly every aspect of our lives. Trading and investing are no exceptions. We have built a leadership position in mobile trading platforms; we're pioneering the concept of social service in the broker space and we're leveraging our data and analytics capabilities to meet the changing needs and behaviors of our clients. And finally, investors in general will continue to grow more experienced and sophisticated. That is why we innovate continually, building out enhanced technology, education and support to make it easier for traders and investors to learn and make informed trading and investing decisions. Our work is not done. We'll continue on our path. We have a strong competitive position in the market and are well-positioned to continue to execute well against our strategy. And now, I'll turn the call over to our new CFO, Steve Boyle, who will walk through the details of our financial results and our outlook for 2016. Stephen J. Boyle: Thank you, Fred and good morning, everyone. As the newest member of the TD Ameritrade leadership team, I've had the unique opportunity of observing this company as it closes out one year and heads into another. There is a strong culture of accountability and continuous improvement, a tremendous degree of focus and a great team of people here. Fred, Bill and the rest of management helped build that culture and turned this company into a real growth and earnings powerhouse. As a result, fiscal 2015 was a strong year across many dimensions. So with that, let's begin with a financial overview on slide nine. For the quarter, on line one, transaction-based revenues, $364 million, up $32 million or 10%. Trades per day were up 76,000 or 19%, driving approximately $69 million in incremental revenue, partially offset by lower commission rates. Overall, commission rate compression has slowed and commission revenue was strong. On line two, asset-based revenue is up $5 million or 1% due to balance growth. These results are net of a $6 million revenue deferral in the current quarter related to an Amerivest's performance-based fee rebate offer. This offer is unique in the market and is resonating with our clients. We expect to continue with it for the next 12 months for new and existing customers as long as they contribute new money. On line four, overall revenue was up $36 million or 5% year-over-year to a record $831 million. On line five, operating expenses, excluding advertising totaled $422 million for the quarter, up 2%. Excluding higher trading volumes, which impacted clearing and execution, expenses were right in line with our expectations. All this resulted in earnings per share of $0.40, up 5%. Return on equity was 17% for the quarter. On lines 18 and 19 our EBITDA was at $405 million or 49% of revenue. Moving to the full-year comparisons, on line four, revenue was up $124 million or 4% due to transaction-based revenue being up 4%; a great result, and asset-based revenue being up, 5%. On line seven, total operating expenses were up $84 million or 5% primarily related to head count, incentive pay and trading volumes and mix. On line 11, other expense is up $22 million primarily due to the issuance of new debt in the March quarter. On line 13 our pre-tax margin was a strong 40%. Earnings per share grew $0.07 or 5%, return on equity for the year was 17%. EBITDA came in at $1.5 billion, representing 47% of net revenues. Let me share some additional detail on our spread-based revenues starting with the next slide. With net interest margins stable for the third straight year spread-based revenue was up due to balance growth. We finished the year with nearly $1.5 billion in revenue, up 4% from last year. Spread-based balances averaged $96 billion for the year, up $5 billion or 5% from last year. Margin balances averaged a record $12.1 billion for the year, up 15% from last year and net stock lending was solid at $174 million for the year, up 3%. When we look ahead for fiscal 2016 we would expect balanced growth to continue, along with likely NIM expansion. Now let's look at the IDA on slide 11. Average IDA balances for the year were up $3 billion or 4%, which drove revenue up $32 million. This growth was partially offset by two basis points in lower yields or $13 million. Our client's net buying activity was a record for the year at $41 billion, up 5% year-over-year which limited IDA growth. However we did see an increase in IDA balances in the September quarter following the market's decline. When we look ahead for fiscal 2016, we expect continued revenue growth to be likely, due to growth in both balances and net yield. That said while net new client asset growth is a primary driver of IDA balance growth investor sentiment is a key variable which is outside of our control. And when considering net yield we would expect increases next year, primarily as a result of reinvesting the IDA ladder at higher rates than maturities. The yields on our maturing balances are relatively low, such that we would expect extensions in our modeled rates scenarios to drive an overall increase in net yield despite the challenging rate environment. Now let's turn to the next slide on interest rate sensitive assets. Interest rate sensitive asset balances, which ended the year at a record $108 billion are up $8 billion or 8% from last year. Cash as a percentage of total client assets ended the period at 15.3%, up 13.7% at the end of June as market volatility over the September quarter drove more clients to cash and client assets fell due to the markets. Our overall consolidated duration declined slightly to 2.1 years as of September 30 corresponding to a slightly higher percentage of floating liabilities. With the start of the new fiscal year we've updated our sensitivity model to reflect updated balances and shares outstanding. We enhanced our disclosure to now reflect the range of potential EPS impacts that is dependent upon potential sharing with clients and incremental investments in the business as rates increase. The first year following a 100 basis point parallel shift in the yield curve would result in an incremental $0.32 to $0.48 of EPS. In year two this incremental impact increases by $0.07 due to ladder rolls and in year three the incremental impact is $0.08. The high end of the range for each year is higher than our prior-year disclosure driven by balance increases and fewer shares outstanding. And still assumes no sharing with clients and no incremental investments. The low end of each year's range is, as I've already said a function of potential client sharing and investments in the business. The competitive environment will dictate how we actually behave when rates increase, but at this time we do not anticipate much sharing or additional investing on at least the first 50 basis points of increases. After that, more sharing and investing is likely. Now for a look at our full-year expectations for 2016, let's turn to the next slide. We are continuing to provide outlook ranges for the key metrics in our business. Looking ahead our 2016 outlook is an earnings per share range of $1.45 to $1 75. The primary variables will be trading levels and interest rate assumptions. When we considered the interest rates we modeled multiple scenarios including looking at the forward curve and various forecasts from Global Insight. An increasing fed funds and increasing yield curve scenario was used for the high end while a no change to fed funds and declining yield curve scenario was used for the low-end. The forward rate curve as of September 30 is included in the appendix as a reference. Our focus for trading will be on continued leadership. Our expectations for the year are similar to what we saw in 2015 although activity is challenging to forecast. We also believe commission rates will fluctuate largely due to changes in trading mix. Our outlook range is $11.75 per trade to $12 per trade for the year. Asset-based balances will continue to be influenced by organic net new client asset growth and client behavior. As Fred mentioned earlier we will continue to target 7% to 11% net new asset growth, but as always we'll strive for the high end of the range. And when it comes to expenses we plan to increase discretionary investments gradually. We expect total operating expenses to grow between 2% and 6%. This is inclusive of ad spend which is expected to grow to $260 million. We are expecting 38% to 39% for effective tax rate for the year. Now let's turn to the final slide. Our asset gathering momentum is expected to continue. It remains a top priority and we aspire to deliver an eighth consecutive year of double-digit growth. We expect the markets to remain uncertain for some time, as the fed continues to evaluate the environment for an interest rate increase. This uncertainty has generally resulted in intermittent volatility and good trading activity. Enhancing advice solutions for our clients will remain a strategic priority, fueling the ongoing growth of our third revenue stream. We'll be disciplined in managing expenses, but will continue investing for growth. When we think about returning capital to shareholders in 2016, our target is 60% to 80% of net income excluding amortization of intangibles. Earnings per share, excluding amortization of intangibles generates tangible equity. Amortization is equal to about $0.10 in diluted EPS. Our chosen means of distribution will be -- will continue to be through quarterly dividends and share repurchases. Our quarterly dividend has been increased to $0.17 per share. We expect to target dividend at approximately 40% of net income excluding amortization of intangibles going forward. In addition, we plan to continue our share repurchase program as an ongoing capital distribution mechanism and are targeting 20% to 40% of net income excluding amortization of intangibles. Our EPS outlook range for fiscal 2016 is $1.45 to $1.75. Our recurring revenue streams provide comfort in delivering on the low end, while the potential for strong trading, rising interest rates and continued momentum in balance growth make the high end attainable. And we'll deliver on those goals with the competitive and growth oriented mindset. Organic growth and industry leadership remain priorities as we work to build long-term earnings power. I look forward to meeting many of you over the next several weeks to discuss these goals and our plans for the future. And now before we go into Q&A I would like to turn it back over to Fred. Fredric J. Tomczyk: Thank you, Steve. Now before we open up the call to Q&A, I would like to say thank you to someone who's played a critical role in this organization over a long period of time; Bill Gerber. Bill is with us this morning for one more call. And I wanted to take this opportunity to say how much I, our management team and our associates of TD Ameritrade have appreciated the contributions he has made to TD Ameritrade over a career spanning some 16 years. He's been tirelessly committed to making our company a better place and for that he deserves to enjoy a long, happy, healthy environment. Bill, we thank you very much. William J. Gerber: Thanks, Fred and thanks, Steve. Good morning, everyone. Fred and Steve went through the highlights of the quarter and the year. So I'm here really to answer any detailed question related to 2015 as needed in the Q&A portion of the call. While I am here though I want to thank you all for the support over the years. It has been a pleasure working with you. My focus has always been to provide financial transparency and I hope that effort helped you in your coverage and consideration of TD Ameritrade. And with that I'll turn the call over to the operator to start Q&A.

We will now begin the question-and-answer session. The first question comes from Rich Repetto of Sandler O'Neill. Please go ahead. Richard H. Repetto: Good morning, Fred, good morning, Steve and good morning, Bill. First congrats on closing out a strong fiscal year 2015. So yes the first question relates to fee waivers, Fred and our waivers on the fees. And I know this – I just wondered if you could review the rules of Amerivest and if you have two quarters of declining balances, was there any fee waivers and what's the outlook of recovery, I guess and the rules for that? Fredric J. Tomczyk: Yeah. Maybe I'll turn this one over to Steve, Rich. Stephen J. Boyle: Thanks, Rich. So basically for customers that are eligible, if there is two consecutive quarters of performance that's not positive, then those – we essentially don't earn those fees and so we're not accruing those fees in our income statement. So that amount was approximately $4 million last quarter, $6 million this quarter. We have on the books about $2 million in accrue – in fees that should we not have negative performance next quarter, would be returned into income. Richard H. Repetto: Okay. Fredric J. Tomczyk: So if we work through the math, Rich, something about $7.5 million either has or will be rebated or waived to our clients and passed, so to speak. Richard H. Repetto: Got it. Okay. Thanks, that's helpful. And then the follow-up has to do, I guess with the guidance. Over the years we've become accustomed to focusing on the midpoint. And I guess the question is there's some things we can't see in regards to other revenue and that, it is material at $50 million to $60 million, but I guess maybe if I could single out a question would be, on the average trading commission, that certainly if the range 11.75% to 12% is the lowest it's been. I understand mix but do you expect any competition or it just seems like that's looking at it with a glass half-full on that range? Fredric J. Tomczyk: As we look at the base commission rates on a product-by-product basis they are relatively stable. Maybe down a bit on the options because the contracts per trade are down, which will also affect the order routing revenue. So I think generally speaking I mean, they are relatively stable, but we've had quite a mix shift here, so and that does impact. Because when you do the futures not only it has a lower commission per trade it doesn't have any order routing revenue either. Richard H. Repetto: Okay, it's the growing futures again weighing on the mix I guess? Fredric J. Tomczyk: Yeah. I mean – whereas three or four years ago we had nothing in futures and now we're running at 11%. Richard H. Repetto: Okay. I think you failed to disclose also that Bill Gerber's handicap outlook for the next year ought to be five to ten for the coming year, or he's sandbagged it, anyway. Fredric J. Tomczyk: I saw him at Pine Valley last week and it didn't look like he was a five or ten. Richard H. Repetto: Okay. Thanks guys. That helps. Fredric J. Tomczyk: Okay.

The next question is from Devin Ryan of JMP Securities. Please go ahead. Devin P. Ryan: Hey, good morning, everyone. Fredric J. Tomczyk: Good morning. Devin P. Ryan: Thanks for the update on capital return and the outlook there, but given a more specific range and maybe the comments on the repurchases, does that imply that you're maybe looking to move away from the buyback algorithm to something that's more planned on a quarterly level? Or just how should we think about that in the context of how you're going to be buying back stock versus paying out dividends, because that's obviously a specific number as well. Fredric J. Tomczyk: I think the way you should think about it is for us to be a little bit more consistent. We've had a lot of feedback from investors on this, and they clearly like share repurchases. And if you look at the last year, we bought some in the first quarter. We were relatively quiet in the second and third and bought a bunch in the fourth. And so, I think you'll probably see us put in repurchase programs that are more – will have a more of a stability through them – that you probably get to the 20% one way or the other, although I don't want to commit to that, that will happen every single quarter. And then on opportunity we will go higher up into the 40% range on share repurchases. So I think it's – we modified it a bit but it will still be – still happen with the algorithms and/or accelerated share repurchases on opportunity. Devin P. Ryan: Okay. Got it. Thanks. That's good to see and helpful. And then, you guys have been focusing on a larger average client or trying to attract a larger average client. Can you talk a little bit about any changes to process here or anything you are doing from a marketing or advertising perspective to drive more success on that front? Fredric J. Tomczyk: Well, on the PCS side, we've had a PCS offering for quite about while, but when we look at it we've now gotten many more larger clients. And so we want to enhance their experience to improve retention, improve asset gathering, improve the relationship we have with them and make sure they are engaged with all that we have to offer. Because a lot of our clients still don't use a lot of what we've got. We've got a lot on – we've got a lot available on our website – but a lot of people don't know about it all. So that's the first thing. And we continue to try and migrate up to larger clients. That's part of the asset gathering journey. On the marketing side, we've definitely changed all the compensation for our marketing people to focus more on assets then accounts. And we've also increased our focus on accounts of larger size which means our marketing programs have been retargeted away from just getting a lot of accounts towards getting bigger accounts in the right places. And so our data and analytics helps quite a bit with that. And then a lot of our strategies are designed around the referrals from the call centers to get people that have – we believe have a fair bit of money – that's not with us, that we then ship that to the branch ICs and they tried to gather the assets. So I think it's a model we continue to refine and continue to try to move them up to get better quality accounts in terms of size. Devin P. Ryan: Got it. Thanks very much.

The next question is from Mike Carrier of Bank of America Merrill Lynch. Please go ahead. Michael R. Carrier: Thanks guys. Just one question on the outlook. Just want to look at the guidance for like the IDA part of the revenues. It just seemed like the balances, at $78 billion as a starting point, like seems fairly low just given that I think we're around that level right now. So I just wanted to make sure there was nothing kind of going on, on the outlook in terms of your expectation of like growing the business and the normal portion that goes to cash. Obviously, I guess the client cash balances is higher than it has been at 15%, so maybe that's one piece of it. But just wanted to get your view on that. Stephen J. Boyle: Yeah, so Mike, this is Steve. So I think that what we've seen over the last couple of years is that this has been a difficult number to forecast. So as we sort of think through the aspects of your question, I think we continue to expect strong client asset growth. And so, the real call is how much of that is going to end up in cash. So we saw a nice spike, as you said, towards the end of the year. We're assuming that some of that may come back down before sort of normal growth kicks in. So obviously, we'd love it if we ended up with a higher percentage of cash, but that's – essentially we are guiding – our guidance essentially reflects that we're going to see more similar levels to last year. Michael R. Carrier: Okay. Got it. And then Fred, maybe just a follow-up. I mean this is kind of bigger picture, but I think when you look at the net new asset growth, it's obviously been healthy for a long period of time and that part of the business is doing well. When you look at kind of the growth outlook, and on one hand there's some potential regulatory changes with the DOL fiduciary proposal impacting the whole industry. On the other hand, from an acquisition standpoint or a growth standpoint, do you see many opportunities like outside the U.S. on the trading side or on the acquisition front? And part of that is just because the buyback level, the target is picking up. It doesn't seem like that really can make a difference, meaning, if you guys wanted to do transactions it's not like you have much debt currently, so you have a lot of capacity. But just wanted to get your view kind of bigger picture on the growth outlook given both of those dynamics in terms of regulation and then the acquisition or the growth outside the U.S. Fredric J. Tomczyk: Well, the Department of Labor clearly has an impact on the entire industry and the way that it presents its products and what products it sells. And we've looked at it. We're doing a deep dive on it right now. We've clearly made our views known to the Department of Labor. We've also had some clients send letters in for some of their views because they weren't aware. And so, we had some 20,000 clients write letters to the Department of Labor. I'd say, as we delve down to it, I mean on a relative basis we think we'd have to make some adjustments and they're not insignificant, but we're in a better position to handle it, or our industry is in a better position to handle the Department of Labor changes than most. And so I think from a competitive position, yes there are some adjustments and some divestments are going to have to be made if it stays as it is. But we think on a relative basis, we're in a good position to continue to execute in the market and we wouldn't expect that the demand for IRAs are going to slow down. We have talked to the DOL, as we've said, and they seemed to listen. Whether they're going to change anything to modify it; we think their intent is right. We don't have a problem with their intent. I think it's more in the drafting of the legislation that we have some issues and some – that need to be clarified and/or modified. So that's on the Department of Labor. I think on the growth side domestically, we continue to feel quite good. I mean, we continue to make innovations, introduce new products, move up market a bit and we feel pretty good about the asset gathering and the trading side. We've had good years. We haven't run out of ideas or things to focus on, which is a good thing. And so we feel pretty good domestically. I think outside the country we have looked around and thought about that. We will make a modest investment into Asia, primarily in Hong Kong and Singapore to start. And just to see if we can offer a U.S. dollar denominated securities offering for people that want to trade on the U.S. market and to see if we can scale it. We do have an office in Singapore now. We like the accounts we are getting. We're probably just not getting as many as we would like and so we're going to make some tests to see if we can scale that up. We can figure that out. I think that will be great, but I think that's still – I think you wouldn't expect too much to happen in 2016. I think I'm talking longer-term. With respect to acquisition I think you're right, Mike, and we've got lots of debt capacity. We still got lots of cash. One thing our shareholders continue to tell us is well, continue to return it; either use it or pay it back, but don't build it up. I think that's a reflection of the market today. But it also, I think makes sense from a management perspective. We haven't, I don't think we would buy anybody outside the United States. I think there's just too much inherent risk in that. Our focus would be more U.S. based in terms of acquisitions. Having said that, you know, we are very comfortable with the capabilities we have got. We really don't need to acquire something for capability other than we might look at a technology play here and there, but inside the industry. We are really pretty much focused on doing what we're doing. We are having success at it and the management team and the board feel strongly that the acquisitions' got to be attractive otherwise keep growing the way you are growing. Michael R. Carrier: Okay. Thanks for the color.

The next question is from Dan Fannon of Jefferies. Please go ahead.

Thanks. One more on guidance, just looking at your operating expense outlook, the high end and the low end in 6% and the 2%. Can you talk about the line items that are, you know, most effected by that? I assume ad and comp are in there but anything in particular you might be more willing to pull back in terms of maybe the gross spend? Fredric J. Tomczyk: Yeah, so I think – you know, I think, the numbers don't have a lot of moving parts in them. As you mentioned when you look at the composition of our expense based compensation and advertising and technology really are the main ingredients. And I think, you know, to the extent that we toggle those numbers somewhat you will probably see a movement in each of those line items.

Great. And then just one more on the guidance with rates, that you mentioned, within the IDA yield just based, regardless of what happens with the fed, yields should improve, they are just based on reinvestment rates. And then just to clarify that and then also just at the high end you are assuming then based, it looks like from slide 19 that's the forecast for the September rate curve outlook for the forward curve that's what you're using to get to the high end? Fredric J. Tomczyk: No. So we're using an external economic service, Global Insights and they provide a high and a low. And so the forward curve that we had there would be somewhere in the middle. And then in terms of your original question, even given a flattening yield curve, which is anticipated in the low scenario our expectation would still be that as we roll our ladder that the rungs of the ladder that are coming off are going to be coming off at a lower rate than the rungs that are coming on. And so in pretty much any scenario we're going to get a slight lift from that and that's what's really driving the numbers for the year as there aren't a lot of Fed funds increases in any of the scenarios.

Great. Thank you.

The next question is from Chris Allen of Evercore. Please go ahead.

Good morning, guys. Fredric J. Tomczyk: Hi, Chris.

I guess, just following up quickly on Dan's question, the rungs of the ladder that are coming off, can you actually give us a rough range of the rates that they are coming off on? Fredric J. Tomczyk: No. We typically don't give that out.

Okay. Fair enough. Just on the net new asset growth this year, the retail was stronger than institutional which I recall hasn't been the case for quite some time. I thought it was running ahead of institutional versus retail. Just kind of how you guys are thinking about the outlook there, you think the retail, the pace of asset growth can continue, obviously you are doing good things at the branch network, sales, referrals, additional color there would be great? Fredric J. Tomczyk: Well, the institutional channel continues to grow quite fast and faster than retail. I'm not talking about year-over-year, I'm talking about the organic growth rate. So if you took the net new client assets from retail versus institutional it would be two to three times higher. So it's just a faster growth business and that's really because you've not only the existing RIAs gathering assets, you're bringing new breakaway brokers every year, so you're, in essence growing your sales force every year, year in and year out by a strong amount. So that's why it grows so much faster and it's also a nice model and a lot of people, particularly wealthy people like that. The RIA model acts in their best interest and has level fees and they only get paid, if they get paid. And so that, both or both – I mean, I think this year, retail had a record year. I mean so they really did have a very strong year in terms of year-over-year growth. We feel very good about that. But the mix is still in terms of net new assets overall is roughly 70% institutional and 30% retail.

Got it, and then any color in terms of where the margin balances ended the quarter? And then how are you guys thinking about sec lending in terms of the outlook moving forward, it came in a bit this quarter probably just would imagine due to some specific stocks coming in, but just how that's incorporated into the outlook moving forward? Fredric J. Tomczyk: Sure. So margin balances, as you would expect in the sell-off the market did come down a little bit and so that's built into our expectations for next year. Stock lending as you mentioned is quite situation-specific. We've seen some good activity early in October here but that's something that we tend to be cautious in our outlook on since it's very relate -- the revenue in particular is very related to certain IPOs and other market events.

Got it. And could you give us margin balances at the quarter end, you have in the past. Fredric J. Tomczyk: Yeah. It's $12.6 billion at the 9/30.

Okay. Thanks a lot guys.

The next question is from Steven Chubak of Nomura. Please go ahead. Steven J. Chubak: Thanks. First question is just a follow-up to Chris' on the margin balances. We were certainly surprised by the resilience in the quarter given the market declines. But Fred, you did note that the balance has actually come off a bit quarter-to-date so far. I was wondering if you can give the balance level as it sits today. Fredric J. Tomczyk: We normally don't give that, but it would be just slightly below the $12.5 billion. Steven J. Chubak: Okay. Thanks for that. And just one question digging into the updated trading outlook; certainly appreciate all the color, Fred, on the product remixing towards more futures versus options. But I wanted to get a sense as to how much of the rebasing expectation in that commission per trade is a function of that product remixing exclusively versus negative competitive dynamics or pricing pressures on the order flow side that you might be seeing. Fredric J. Tomczyk: It's part – I mean you got to remember as the mix changes, the order-routing revenue per trade will fall. Primarily because you've gone -- you've got more options trades and they don't have any order-routing revenue. So I think that's the dynamic. So we haven't seen anything unusual in our order-routing revenue per trade, if you look at it on a product to product basis. Although you may see that come in a bit because on per trade basis we did see number of shares come in a bit and number of contracts per trade come in a bit. On the competitive dynamic it's always been competitive. There's lots of promotions that go on at different times of the year and people are pretty aggressive on free trades to again open a new account. That has – that is not new. That's been going on for quite a while. So I would say, you know, if you ask me – off the top of my head, I would say it's largely due to mix more than anything else. Stephen J. Boyle: And yeah, just to clarify it's futures that don't have any order-routing related to the options. Steven J. Chubak: Okay, I understood. All right. That's it from me. Thanks for taking my questions.

The next question is from Ken Hill of Barclays. Please go ahead. Kenneth W. Hill: Hi. Good morning, everyone. Fredric J. Tomczyk: Hi, Ken. Kenneth W. Hill: So I wanted to start with ETFs, you guys currently offer, I think, about a 100 -- little bit over a 100 free ETFs on your platform. I think there's been some conversation around changing economics there with the issuers. Can you talk to maybe how you're looking to monetize that over time and how those conversations might be going with issuers, assuming you guys share the common goal of continuing to drive a nice profitable relationship for everyone? Fredric J. Tomczyk: With respect to the issuers, I think it's still pretty early. We have a few that are definitely up for a different type of model, few that are not. And we will continue to work through that. I think that it's also, it's an economic trade-off, I mean, there is a way basically that we can get investment product revenue on certain products we might lower the commission or give it away free in exchange for something along a fee-based basis that's a little bit more stable. And so it's more of a trade-off, I think between us and some of the players. And it could be an ETF it could be a mutual fund, so just it's still unclear. Kenneth W. Hill: Okay. Thanks for the color there. Just wanted to pick a little bit at expenses here. So you have the 2% to 6% range. I guess what would cause you to get a little bit towards the higher side, the 6% level on a year-over-year growth basis? Would you need to see more sustainable revenue growth from something like rates or you think that's going to kind of be a tailwind for some time to come? Or could you get a couple of quarters of higher activity levels which might allow you guys to just pick the expenses a bit? Fredric J. Tomczyk: Yeah, so I'd say maybe a couple aspects of both of those. So obviously to the extent that rates moved up faster than our expectations, around the high end of our expectations, that would give us the opportunity to invest more. There's some things that we would like to do in terms of sales people, technology et cetera, et cetera. It's likely that any of those things would ramp quite gradually. And so I think that's the key takeaway that we like to have on there. I think that the key on activity rates is less that we would predict to sustain change in that and start to spend more. But to the extent that we did have high activity rates, that drives some modest marginal expenses. And so you might see expenses pickup in that quarter as you saw in this quarter. For example, we had a very good trading quarter and we saw some slight uptick in our marginal expenses. Kenneth W. Hill: Okay. Thanks for taking my questions.

The next question is from Alex Kramm of UBS. Please go ahead.

Hey, good morning, everyone. Starting with the guidance, I guess for everyone, on the trading side maybe you can talk a little bit more how you came up with an activity rate? I assume it's looking at the last few years, but Fred, you made those comments that you still expect interest rate debates, political uncertainty to be here. So you could argue that the higher end could be higher. Also it seems like some of the benefits you're getting from option trading futures, mobile trading should be driving the base a little bit higher. So maybe you can just flesh it out a little bit, it seems like that could be a little bit more positive. Fredric J. Tomczyk: Yeah, well. I mean I think you all know, Alex, we tend to be a little conservative. It is our – by nature. It is by – there is no sort of mathematical science to it other than looking at the last three to five years, considering the environment and looking at the previous year and you make a judgment call inside that. Could they go higher? Absolutely. And I continue to say the Federal Reserve banks around the world in the developing -- developed countries have put a lot of stimulus into the system. And we're now at the point where even China or Europe announces similar stimulus and we have a robust trading day. And so it's become very news and very event-driven. And I continue to believe that there is no way that the U.S. Federal Reserve unwinds some of what they've done with all the stimulus over seven years, almost now that basically when they start to unwind it is going to be volatile. I think that's – I think most people would agree with that. We've an election going on next year. That will probably take a bigger impact later in the year than earlier in the year, but I think between an election year, Federal Reserve tempering, what's going on in the Middle East, the Federal Reserve banks in other parts of the world, earnings releases, I think in this earnings season you saw some surprises on the downside, some surprises on the upside. The tech stocks continue to do well and quite an appetite in our client base. So it definitely could go higher, but we grow our number of funded accounts. We try to call a relatively conservative range for our activity rate.

All right, fair enough. And then maybe just secondly, on the – coming back to the marginal loan discussion we had earlier – it seems like that was a big focus for investors this year or this quarter. And I think a lot of them expected that to fall off a cliff. So just wondering relative to 2011, for example, we saw much more of a decline when markets gave back. It seems a little bit more resilient or much more resilient this time around. So just wondering, what kind of color you have in terms of what you see in terms of client behavior, while there seems to be more resiliency than maybe last time or what people had expected. Fredric J. Tomczyk: Well, some of it is mix, some of our bigger margin clients that regularly use it, who tend to be a little bit more stable. I also think you have to look at the fact that we had a correction; everything came in and then basically the market's come back pretty much. And so, I think it definitely did come down but it started to come back a bit as the market started to recover and as people saw an opportunity. I also think in today's world, I continue to say basically, it's not obvious where you put your money, if you had to pick from a risk/reward basis the U.S. equity market seems like the best – the tallest midget in the room, so to speak.

So do you – sorry to just follow-up – so do you think there were – were there wider swings in the quarter now or was it just basically fairly stable across the board, the whole time, just trying to read your last comment there on the market coming back. So... Fredric J. Tomczyk: Well, that just went from peak to trough by maybe $1 billion.

Okay. Very helpful. Thank you.

The next question is from Joel Jeffrey of KBW. Please go ahead.

Hi. Good morning, guys. Fredric J. Tomczyk: Good morning. Stephen J. Boyle: Good morning.

Just wanted to follow up a bit on the comment you had made about the number of options contracts being a bit lower and that negatively impacting payment forward flows. Is there any reason that these number of contracts are coming down? Is it an offering you are doing or is it new clients coming on board who are just getting used to trading options? Fredric J. Tomczyk: Something called the VIX. If the VIX goes up, then options become more expensive.

Okay, okay. And then as you think about mobile activity, and I know you've certainly highlighted it's becoming an increasing factor in your business, and I think last quarter you had said that, you know, three to five years you think mobile logins could exceed desktop. I know those guys trade more but is there anything on the expense side that you guys benefit from this or is this sort of an incremental expense and you should expect operating leverage to come from more sort of just increased trading activity? Fredric J. Tomczyk: Well, yes, I mean, the more platforms you have to maintain, and when you get into the mobile world you have multiple devices, and multiple sized devices. So it is – there is an expense from the technical perspective of trying to keep up with all the mobile platforms. You have to put more time into security as well. And so, there's an expense that goes with having a robust mobile offering, that you wouldn't have if you didn't have it, so to speak, because the web is a little easier to deal with. It's more standardized, whereas mobile you've got Androids, you've got Apple and then you've got the different sizes and the different real estate sizes. So that – it does cost more money in expense – but in terms of variable costs, there's really no difference per se. Stephen J. Boyle: Yeah, I guess, I'm not sure if your question was just on the trading side or also on the operating side, but we are seeing productivity benefits from our clients. Things where they used call us up and ask us questions, they're now able to access all of that information mobily. So we're seeing that we could be more productive in terms of our client relationships, so that's an offsetting positive on the expense side. Fredric J. Tomczyk: We also see people that are trading on both desktop and mobile trade more.

Great. Thanks for taking my questions.

The next question is from Chris Harris of Wells Fargo. Please go ahead. Chris M. Harris: Thanks, guys. Fredric J. Tomczyk: Hey, Chris. Chris M. Harris: Hi. Another nice year in investment products fee growth. Wondering if you guys can share with us the organic growth rate of that part of your business and may be how it's trended over time? Fredric J. Tomczyk: I don't know that number off the top of my head. Chris M. Harris: Okay. Fredric J. Tomczyk: Well, we will get back to you on that one. I'm sorry. Chris M. Harris: Okay. No problem. Then a quick one on the guidance. The EPS outlook, is that assuming buybacks? Fredric J. Tomczyk: Yes. Chris M. Harris: It is, okay. So safe to say that 30% of net income maybe at the mid-point is going into buybacks? Fredric J. Tomczyk: 30% of the midpoint is going into buybacks? Somewhere between 20% and 40%. Chris M. Harris: Okay. Thank you guys. Stephen J. Boyle: Net income excluding intangibles. Fredric J. Tomczyk: That's right.

The next question is from Chris Shutler with William Blair. Please go ahead. Chris C. Shutler: Hey, guys, good morning. Just wanted to come back on the margin lending one more time, the rate there has actually been pretty steady for the last few quarters. Could you just talk about what you are seeing so far in October and what your expectation is for 2016 there? Fredric J. Tomczyk: There's really – we haven't noticed any change so far in October, in terms of rate. Chris C. Shutler: And I mean do you think that is a – that it's – has it stabilized at this point or is there still an expectation that it will continue to creep down? Fredric J. Tomczyk: It's hard to say. It really is hard to say because it does depend a lot on the mix and who's borrowing at any given time; and that can vary. Chris C. Shutler: Okay. And then on the rebates for Amerivest, you talked about that earlier. Why are the rebates a good deal for TD Ameritrade, just talk about the improvement you're seeing in terms of new people coming in the door or retention? Thanks. Fredric J. Tomczyk: Well, in our marketing programs we measure the effectiveness of the ads and when we look at – so when we talk to our frontline people, it's definitely a factor in marketing and sales. And some of our marketing ads that emphasize that tend to be very well received in the market and we get lots of attention for that. And so far we think it's working, continues to work well. We've modeled it out. I mean, it should be a rare thing for it to happen. It happened this year. I'm sure it will happen again at some time. But we think you've got to remember that it's not on the whole book, it's only on new accounts and people that add $25,000 to their account. So you have to bring in money to get it and you get it for the next year. But we feel very good about it. We have something we think is differentiating that we haven't seen anybody else try and it seems to help with the sales. Chris C. Shutler: All right. Thank you.

The next question comes from Brian Bedell of Deutsche Bank. Please go ahead. Brian B. Bedell: Hi, good morning folks. Fredric J. Tomczyk: Hi, Brian. Brian B. Bedell: Hi. Just a couple of clarifications on the guidance for the mix of trading. So we were at 43% in derivatives for fiscal year 2015. What percentage of that was futures and that for the 2016 outlook what's your mix assumption, if you have that between stocks, options and futures? Fredric J. Tomczyk: Well, 43% was 10% futures, 32% options and 1% ForEx. The guidance... Stephen J. Boyle: I don't think we've given specific guidance on the numbers. I think we would expect the trends to continue; the derivatives will continue to grow as a percentage of our overall trades and futures to continue to grow, but we haven't broken it out separately. Brian B. Bedell: Okay. And then on the investment product fees, assuming you are not assuming any rebates within the guidance and if that's -- so what is the actual maximum dollar amount of rebate that you could have if the markets go against you? Stephen J. Boyle: Yeah. So you are correct. We haven't assumed anything and I think the run rate gets up to about $8 million a quarter. Brian B. Bedell: Okay. Okay, and then just lastly, Fred, maybe if you can just talk a little bit about the RIA trend whether you see that improving in terms of an industry-wide breakaway broker trends in the current environment or do you think that's going to be slowing say over the next year. And then your competitive position, do you still you will continue to gain share in either one of those environments over the next say one to two years? Fredric J. Tomczyk: Well, we continue to see very good trends on the breakaways. Our pipelines are good. So we haven't seen signs of it abating. There always seems to be opportunities in the market and I think one of the things, about the Department of Labor stuff you may see an even bigger trend if the Department of Labor goes through towards the RIA model. I think that's safe to say. With respect to the competitive environment it's getting more competitive. There's no question people have noticed our success there. The whole industry sees the A caps (63:42) between each other and so there's no question people are getting more competitive when they are face-to-face with us. I think that's fair. But we continue, I visited a bunch on the West Coast last week and I would say to you that we continue to – it continues to amaze me how much they like our service model, our culture, our people and our technology. So we continue to do well and we have a good reputation and a good brand in that space. Brian B. Bedell: That's great color. Thanks. Thanks very much.

The next question comes from Bill Katz of Citigroup. Please go ahead.

Okay. Good afternoon, everyone. Thanks for taking my questions. So I'm looking at slide number 12 and looking at the updated sensitivity for the first hundred basis points. I'm just trying to try to square away with the fact that you're going to potentially share off 50 basis points. How the right-hand column actually plays into the calculation at all. So can you just sort of help, what ranges between $0.32 and $0.48 for instance. What's the scenario? Obviously you shared about 50 bps, it's based on 100, I'm not sure how you get to the top end, just trying to understand that level of sensitivity. Fredric J. Tomczyk: We've tried to show you the whole range and show you the top end of the range to give you that number that you – if we would have had our prior disclosure, that's the equivalent number. The competitive environment that is, that nobody is sharing or very little's being shared and we're not seeing any impact from not sharing much, then we will not share much. We will maximize earnings. Our clients come to us to invest. Our history has been largely that basically they have been relatively pricing sensitive on cash rates. We have never competed on cash rates but we wanted to give a range to make sure that we are clear of the various scenarios that could play out depending on the competitive environment and investment decisions that management might make. Stephen J. Boyle: Just to make sure we're absolutely clear the high end of the range has no sharing and no reinvestments. The $0.48 for example in year one assumes zero sharing and zero additional incremental investments.

But your footnote does say that you expect to share something above 50 basis points perhaps but it depends on the backdrop? Fredric J. Tomczyk: Right. Stephen J. Boyle: Yeah.

Okay, and that's helpful. So just to come back to capital management for a second. If I just look at where your guidance was this time last year, it's about the same range if you look at year-on-year growth of EPS it's about 5%. And you have some very good sort of top line dynamics in terms of acquisition of assets and client trading picking up. What's the thought process between buyback right now given sort of a flatter look for EPS year-on-year growth from a range perspective versus may be stepping up the reinvestment in the business to try and drive a little more revenue and market share? Fredric J. Tomczyk: Well, we continue to – when we do buybacks, we take a longer-term perspective. We're not trying to just sort of manage it for a one year horizon. We look much more at three to five. So that's the first point. We always said we have number of uses of our shareholders' money. There is investments in the business and then there is buybacks, there's dividends, recurring dividends, there's debt pay down and then there is one-time dividends. And we have used all of those at some way, shape or form over the last three to five years. Right now we've invested a fair bit in the business this year. We continue to have productivity improvements and invest – would the management team like to invest more? Probably, but I do believe that you hit a point of diminishing returns where you're trying to do too much, I think the fewer things you focus on and the more focused your bets are the more effective they are. But in the right environment we might invest a little bit more because it's going to run through earnings and we're trying to make sure we balance the short-term and a long-term from an earnings perspective for our shareholders. Our second priority would be buybacks in this environment and they all look for the future. That's why you saw us buy 7 million during the quarter at the price that the stock's currently trading. Does that help you, Bill?

Very much so. Just one point of clarification. I didn't see in the press release, I might have read too quickly, I apologize. Have you put your end of period share count there, I'm trying to box that with the 7 million versus your fully diluted number? Stephen J. Boyle: 540 million. Fredric J. Tomczyk: 540 million.

Okay. Thank you very much for taking my questions. Fredric J. Tomczyk: Thanks Bill.

The next question is from Rob Rutschow of CLSA. Please go ahead. Rob C. Rutschow: Hey, good morning. Thanks for taking my questions. Quick follow-up one more time on the margin balances, presumably those are all retail. Can you tell us how they look on a relative basis compared to client assets? So are the margin balances kind of higher, lower, in line with the average lower relative declining assets for retail? Stephen J. Boyle: Yeah. So I think, they're not all retail but they're predominantly retail and I'd say we're not seeing clients overextend themselves in margin or come back a lot. I think that the margin balances as a percentage of client assets have been fairly steady over time. Rob C. Rutschow: Okay. And a question on account growth, you did 5% year over year growth in accounts that's 100 basis points better than some of your peers. What do you attribute that outperformance to and is that similar to client assets, where you're seeing most of the growth in RIAs or is it more retail oriented? Fredric J. Tomczyk: Well, both sides had decent account growth but you're clearly – you are going to get higher account growth in institutional. So institutional is growing very fast. It's pretty hard to grow 5% or more in accounts in retail. It's not to say we have not done in the past, we have. But you really need the institutional side to get the asset gathering and the account growth up. Rob C. Rutschow: Okay. Thanks. Fredric J. Tomczyk: Okay.

There are no further questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Fred Tomczyk for closing remarks. Fredric J. Tomczyk: Hey, well, thank you, everyone. Thanks for your time this morning. It was another strong year from TD Ameritrade in just about every area of our business. Clearly, we are quite proud of the $63 billion in net new assets; the record trading volumes, the record investment product fees and continued expense discipline. And we continue to run our strategy and it continues to perform well for us in a pretty difficult environment with interest rates where they are. We've been fighting that for seven years and as you look out into 2016 we've been pretty conservative on our interest rate assumptions to make sure that we are being appropriate in how we manage the business. If interest rates rise, that will be nice for our shareholders and it will also give management a chance to make some adjustments and workout further opportunities. With that, we will see you all again in January. Take care. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.